Alcoa 2007 Annual Report Download - page 4

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2
20 years. It will be the most environ-
mentally friendly smelter in the
world and is hydropowered by glacial
runoff. The Mosjøen anode plant in
Norway will produce anodes for Alcoa
Fjar aál as well as for a jointly held
smelter with Elkem in Norway.
Our investments for growth included
both upstream and downstream
projects around the world. Examples
include our investment in the Serra
do Facão hydroelectric project in
Brazil, the opening of our third flat-
rolled products facility in China,
progress we have made on the Juruti
project, the opening of an anode
plant in Norway, our first new smelter
in 20 years in Iceland, our continued
expansion of the Bohai rolling mill
in China, and our work rebuilding
and upgrading our Russian plants.
Looking ahead, we are exploring
plans for a second smelter in Iceland
and are working with the government
of Greenland to explore the possibil-
ity of constructing a smelter there,
in addition to other growth projects.
We added a new lithographic line
at Warrick and reached new renew-
able power contracts in Massena
and Wenatchee that help secure the
futures for those plants and commu-
nities, and we are working on similar
efforts across the globe. In fact,
early in the first quarter of 2008, we
reached an agreement with the
government of Quebec to repower
our three smelters in the province
through 2040. This is important in
that it is better for all stakeholders
that we extend the life of these
operations versus simply building
new facilities. We must do both
to keep up with growing demand.
We also made significant investments
in our Tennessee Operations, with
capital improvement projects totaling
more than $100 million for both the
smelting and fabricating areas, and
we broke ground on a $22 million
project that will increase our recy-
cling capacity by nearly 50 percent.
Also in the U.S., we continued to
upgrade our power generating in
Warrick to supply our smelter and
fabricating facilities.
In total, our capital investments
were approximately $3.16 billion
in 2007 (excluding currency
impacts) with nearly 60 percent,
or $1.7 billion, dedicated to growth
projects. These investments are
delivering today and tomorrow.
One important measure in a capital-
intense industry such as ours is
Return on Capital (ROC). Alcoa’s
trailing 12-month ROC was 16.1
percent, excluding investments
in growth projects. Including those
investments in growth, our ROC
stands at 12.7 percent, well above
the cost of capital.
To fund those investments, we
delivered a record performance in
cash from operations of more than
$3.1 billion, compared with $2.6 bil-
lion in 2006, helping to keep the
Company’s debt-to-capital ratio within
our targeted range at 30.2 percent.
Our strong balance sheet allowed us
to take additional action to improve
returns for shareholders. During
the year we increased our dividend
by 13 percent. In addition, the Board
authorized, and later in the year
increased that authorization, a share
repurchase program, for a total share
repurchase authority of up to 25 per-
cent of the Company’s outstanding
shares. Through the end of 2007, we
had repurchased approximately
68 million shares, or 8 percent of the
25 percent under that authorization.
Managing Our Portfolio
In 2007, we made major
progress on our plan
to manage our portfolio
in order to maximize
returns for shareholders.
The first action in 2007 involved
completion of our joint venture
with SAPA, combining soft alloy
extrusion businesses into a company
in which we hold a more than
40 percent stake.
In the third quarter, we announced
that we sold our automotive castings
business, which did not fit with our
other core automotive businesses.
And, at the end of the year, we
reached agreement with Rank Group
to sell our packaging and consumer
businesses – including closures, food
packaging, Reynolds Wrap®, and
Return on Capital
percent * †
Bloomberg Methodology calculates
ROC based on the trailing four quarters.
* Adjusted for Growth Projects
† Reconciliation on page 80
03 04 05 06 07
0
4
8
12
16
20